1
PREFERRED STOCK PURCHASE AGREEMENT
BETWEEN
INTEGRATED SURGICAL SYSTEMS, INC.
AND THE
INVESTORS SIGNATORY HERETO
PREFERRED STOCK PURCHASE AGREEMENT dated as of July 30, 1999
(the "Agreement"), between Integrated Surgical Systems, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company")
and the persons signatory hereto (each an "Investor").
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and sell to the
Investors, and the Investors shall purchase, for a total purchase price of
$3,000,000, 3,000 shares of the Company's Series E Convertible Preferred Stock
and warrants to purchase an aggregate of 37,500 shares of the Company's common
stock.
WHEREAS, the issuance and sale of the Series E Convertible
Preferred Stock and the warrants to the Investor will be made in reliance upon
the provisions of Section 4(2) of the Securities Act of 1933, as amended, and
Regulation D promulgated thereunder by the Securities and Exchange Commission.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "Bid Price" shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2. "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.3. "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or give
any right to subscribe for any Capital Shares of the
2
Company or any warrants, options or other rights to subscribe for or purchase
Capital Shares or any such convertible or exchangeable securities.
Section 1.4. "Closing" shall mean the closing of the purchase and sale of
the Preferred Stock pursuant to Section 2.1.
Section 1.5. "Closing Date" shall mean the date on which all conditions to
closing have been satisfied and the Closing shall have occurred.
Section 1.6. "Common Stock" shall mean the Company's common stock, par
value $.01 per share.
Section 1.7. "Conversion Shares" shall mean the shares of Common Stock
issuable upon conversion of the Preferred Stock.
Section 1.8. "Damages" shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorney's fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.9. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 6.1.
Section 1.10 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the SEC thereunder.
Section 1.11 "Legend" See Section 9.1.
Section 1.12. "Market Price" on any given date shall mean the single lowest
intraday or closing price (as reported by Bloomberg L.P.) of the Common Stock
on any Trading Day during the five Trading Days prior to the date for which
Market Price is to be determined.
Section 1.13. "Material Adverse Effect" shall mean any effect on the
business, Bid Price, operations, properties, prospects, or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement,
the Registration Rights Agreement or the Warrant in any material respect.
Section 1.14. "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.15. "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided,
2
3
however, that "Outstanding" shall not mean any such Shares then directly or
indirectly owned or held by or for the account of the Company.
Section 1.16. "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.17. "Preferred Stock" shall mean the Company's Series E
Convertible Preferred Stock, par value $.01 per share issued pursuant to the
Certificate of Designations attached hereto as Exhibit A.
Section 1.18. "Principal Market" shall mean the Nasdaq National Market, The
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.19. "Purchase Price" shall mean one thousand dollars ($1,000) per
share.
Section 1.20. "Registrable Securities" shall mean the Conversion Shares and
the Warrant Shares until (i) the Registration Statement has been declared
effective by the SEC, and all Conversion Shares and Warrant Shares have been
disposed of pursuant to the Registration Statement, (ii) all Conversion Shares
and Warrant Shares have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Conversion Shares and
Warrant Shares have been otherwise transferred to holders who may trade such
shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such securities
not bearing a restrictive legend or (iv) such time as, in the opinion of
counsel to the Company, all Conversion Shares and Warrant Shares may be sold
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
Section 1.21. "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor on
the Closing Date annexed hereto as Exhibit C.
Section 1.22. "Registration Statement" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement, and the
Warrant and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
3
4
Section 1.23 "Regulation D" shall mean Regulation D promulgated by the SEC
under Section 4(2) of the Securities Act.
Section 1.24 "SEC" shall mean the Securities and Exchange Commission.
Section 1.25 "Section 4(2)" shall mean Section 4(2) of the Securities Act.
Section 1.26 "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC thereunder.
Section 1.27 "SEC Documents" shall mean the Company's Form 10-KSB for the
fiscal year ended December 31, 1998, Form 10-QSB for the fiscal quarter ended
March 31, 1999, as amended, Form 8-K dated April 28, 1999, the Proxy Statement
for its 1999 Annual Meeting and its Prospectus dated June 10, 1999.
Section 1.28. "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.29, "Warrant" shall have the meaning set forth in Section 2.2 and
substantially in the form of Exhibit B.
Section 1.30. "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Investment.
(a) The Company agrees to sell and each Investor, severally and
not jointly, agrees to purchase the number of shares of Preferred Stock set
forth on the signature page hereto at the Purchase Price on the Closing Date.
(b) On the Closing Date, the Company shall issue and sell to the
Investor, against payment of the total Purchase Price of the shares of
Preferred Stock purchased by the Investor by wire transfer of immediately
available funds in accordance with instructions from the Company, the shares of
Preferred Stock set forth on the signature page hereto and the Warrant.
(c) The Closing of the sale and purchase of the Preferred Stock
and Warrant shall be subject to the completion of the following conditions:
4
5
(i) acceptance and execution by the Company and the
Investor of this Agreement and all Exhibits hereto;
(ii) all representations and warranties of the Investor
and of the Company contained herein shall remain
true and correct as of the Closing Date;
(iii) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Preferred Stock and Warrant, or
shall have the availability of exemptions
therefrom;
(iv) the sale and issuance of the Preferred Stock and
Warrant, and the proposed issuance of the Common
Stock underlying the Preferred Stock and the
Warrant shall be legally permitted by all laws and
regulations to which the Investor and the Company
are subject and there shall be no ruling, judgment
or writ of any court prohibiting the transactions
contemplated by this Agreement;
(v) receipt by the Investor of an opinion of Snow
Xxxxxx Xxxxxx P.C., counsel to the Company, in the
form of Exhibit D hereto;
(vi) delivery to the Investor of the Irrevocable
Instructions to Transfer Agent in the form
attached hereto as Exhibit E;
(vii) there not having occurred (i) any general
suspension of trading in, or limitation on prices
listed for, the Common Stock on The Nasdaq Small
Cap Market, (ii) the declaration of a banking
moratorium or any suspension of payments in
respect of banks in the United States, (iii) the
commencement of a war, armed hostilities or other
international or national calamity directly or
indirectly involving the United States or any of
its territories, protectorates or possessions, or
(iv) in the case of the foregoing existing at the
date of this Agreement, a material acceleration or
worsening thereof; and
(viii) there not having occurred any event or
development, and there being in existence no
condition, having or which reasonably and
forseeably could have a Material Adverse Effect.
Section 2.2. The Warrant. On the Closing Date, the Company will issue to
the Investor a warrant exercisable beginning six months from the Closing Date
and then exercisable any time over the three-year period there following, to
purchase the Investor's pro rata share of an aggregate of 37,500 Warrant Shares
at the Exercise Price (as defined in the Warrant) in the form of Exhibit B
hereto. The Warrant Shares shall be registered for resale pursuant to the
Registration Rights Agreement.
Section 2.3. Liquidated Damages. The parties hereto acknowledge and agree
that the sums payable pursuant to the Registration Rights Agreement shall
constitute liquidated damages and not penalties. The parties further
acknowledge that (a) the amount of loss or damages likely to be incurred is
incapable or is difficult to precisely estimate, (b) the amounts specified in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by the Investor in
connection with the failure by the Company to timely cause the registration of
the Registrable Securities and (c) the parties are sophisticated business
parties and have
5
6
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
Section 3.3. Authority. This Agreement and each Exhibit hereto which is
required to be executed by Investor has been duly authorized and validly
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
Section 3.5. Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture,
instrument or agreement to which Investor is a party or is subject, or by which
Investor or any of its assets is bound; (b) conflict with or constitute a
material default thereunder; (c) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Investor to any third party;
or (d) require the approval of any third-party (which has not been obtained)
pursuant to any material contract, agreement, instrument, relationship or legal
obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.
6
7
Section 3.6. Disclosure; Access to Information. Investor has received all
documents, records, books and other publicly available information pertaining
to Investor's investment in the Company that have been requested by Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and Investor has reviewed or received copies of any such reports that have
been requested by it.
Section 3.7. Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that, except as set forth
on the Schedule of Exceptions attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted except as set forth in Section 4.1
of the Schedule of Exceptions or as described in the Company's SEC Documents.
The Company does not have any subsidiaries and does not own more that fifty
percent (50%) of or control any other business entity, except as set forth in
the SEC Documents. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify could not
reasonably be expected to have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement and the Warrant and to issue the Preferred
Stock, the Conversion Shares, the Warrant and the Warrant Shares, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement and the Warrant by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement and the Warrant have been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
The Company has duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the conversion of 3,000 shares of
Preferred Stock and for the exercise of the Warrants.
7
8
The Company understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of the Conversion Shares and the Warrant Shares.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Preferred Stock and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement and the Certificate of Designations
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company and notwithstanding the commencement of any case under 11 U.S.C.
Section 101 et seq. (the "Bankruptcy Code"). In the event the Company is a
debtor under the Bankruptcy Code, the Company hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. Section 362
in respect of the conversion of the Preferred Stock and the exercise of the
Warrants. The Company agrees, without cost or expense to the Investor, to take
or consent to any and all action necessary to effectuate relief under 11 U.S.C.
Section 362.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, par value $0.01, of which
8,576,955 shares were issued and outstanding as of June 30, 1999, and 1,000,000
shares of Preferred Stock, par value $0.01, of which 100 shares of Series A
Convertible Preferred Stock, 880 shares of Series B Convertible Preferred
Stock, 750 shares of Series C Convertible Preferred Stock and 2,000 shares of
Series D Convertible Preferred Stock were issued and outstanding as of June 30,
1999, and 3,000 shares of Preferred Stock have been properly designated as
Series E Convertible Preferred Stock. Except as set forth in Section 4.3 of
the Schedule of Exceptions, there are no outstanding Capital Shares
Equivalents. All of the outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully paid and
non-assessable.
Section 4.4. Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on the
Principal Market. As of the date hereof, the Principal Market is The Nasdaq
SmallCap Market and the Company has not received any notice regarding, and to
its knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5. SEC Documents. The Company has delivered or made available
to the Investor true and complete copies of the SEC Documents. The Company has
not provided to the Investor any information that, according to applicable law,
rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act, and rules and regulations of the SEC
promulgated thereunder and the SEC Documents did not contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents complied in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect
8
9
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) as set forth in Section 4.5
to the Schedule of Exceptions) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended. Neither the Company nor
any of its subsidiaries has any indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or to
become due) that would have been required to be reflected in, reserved against
or otherwise described in the financial statements or in the notes thereto in
accordance with GAAP, which was not fully reflected in, reserved against or
otherwise described in the financial statements or the notes thereto or was not
incurred in the ordinary course of business consistent with the Company's past
practices since the late date of the financial statements.
Section 4.6. Exemption from Registration; Valid Issuances. The sale of the
Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares will
be properly issued pursuant to Rule 4(2), Regulation D and/or any applicable
state securities law. When issued, the Preferred Stock, the Conversion Shares
and the Warrant Shares will be duly and validly issued, fully paid, and
non-assessable. Neither the sales of the Preferred Stock, the Conversion
Shares, the Warrant or the Warrant Shares pursuant to, nor the Company's
performance of its obligations under, this Agreement, the Registration Rights
Agreement or the Warrant will (i) result in the creation or imposition by the
Company of any liens, charges, claims or other encumbrances upon the Preferred
Stock, the Conversion Shares, the Warrant Shares or any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to
preemptive or other rights to subscribe to or acquire the Capital Shares or
other securities of the Company. The Preferred Stock, the Conversion Shares,
and the Warrant Shares shall not subject the Investor to personal liability by
reason of the possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Preferred Stock, the
Conversion Shares, the Warrant or the Warrant Shares, or (ii) made any offers
or sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Preferred Stock, the
Conversion Shares, the Warrant or the Warrant Shares under the Securities Act.
Section 4.8. Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Restated
Certificate of Incorporation, as amended and in effect on the date hereof, and
the Company's By-Laws, as amended and in effect on the date hereof.
Section 4.9. No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares,
do not and will not (i) result in a violation of the Company's Restated
Certificate of Incorporation or By-Laws, each as amended and in effect as of
the date hereof, or (ii) conflict with,
9
10
or constitute a material default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
agreement, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect) nor is the Company otherwise in violation of, conflict
with or in default under any of the foregoing. The business of the Company is
not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect. The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or
issue and sell the Preferred Stock or the Warrant in accordance with the terms
hereof (other than any SEC, NASD, The Nasdaq Stock Market Inc., or state
securities filings that may be required to be made by the Company subsequent to
any Closing, any registration statement that may be filed pursuant hereto, and
any shareholder approval required by the rules applicable to companies whose
common stock trades on The Nasdaq SmallCap Market); provided that, for purposes
of the representation made in this sentence, the Company is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Investor herein.
Section 4.10. No Material Adverse Change. Since January 1, 1999, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents. No "Event of Default" (as defined in
any agreement or instrument to which the Company or any of its subsidiaries is
a party) and no event which, with notice, lapse of time or both, would
constitute an Event of Default (as so defined), has occurred and is continuing
which could have a Material Adverse Effect.
Section 4.11. No Undisclosed Liabilities. The Company has no liabilities
or obligations which are material, individually or in the aggregate, and are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those incurred in the ordinary course of the Company's business since January
1, 1999, and which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
Section 4.12. No Undisclosed Events or Circumstances. Since January 1,
1999 no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which
has not been so publicly announced or disclosed in the SEC Documents.
10
11
Section 4.13. No Integrated Offering. Except as set forth in the SEC
Documents, the Company has not issued, offered or sold any shares of
convertible preferred stock, warrants to purchase shares of Common Stock or any
shares of Common Stock (including for this purpose any securities convertible
into a exchangeable or exercisable for the Preferred Stock or Common Stock or
any such other securities) within the six-month period next preceding the date
hereof, and the Company shall not permit any of its directors, officers or
Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of the Preferred
Stock, Warrants or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by the Company for
the offer and sale to Investor of the Preferred Stock (and the Conversion
Shares) or the Warrants (and the Warrant Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has been used or
authorized by the Company or any of its officers, directors or Affiliates in
connection with the offer or sale of the Preferred Stock (and the Conversion
Shares) as contemplated by this Agreement or any other agreement to which the
Company is a party.
Section 4.14. Litigation and Other Proceedings. There are no lawsuits or
proceedings pending or to the best knowledge of the Company threatened, against
the Company, nor has the Company received any written or oral notice of any
such action, suit, proceeding or investigation, which could reasonably be
expected to have a Material Adverse Effect. Except as set forth in the SEC
Documents, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which might result in a Material Adverse
Effect.
Section 4.15. No Misleading or Untrue Communication. The Company, any
person representing the Company, and, to the best knowledge of the Company, any
other person selling or offering to sell the Preferred Stock or the Warrant in
connection with the transaction contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer or sale of the
same which contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements, in the light
of the circumstances under which they were made, not misleading.
Section 4.16. Material Non-Public Information. The Company has not
disclosed to the Investor any material non-public information that (i) if
disclosed, would, or could reasonably be expected to have, an effect on the
price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the
date hereof but which has not been so disclosed.
Section 4.17. Insurance. The Company maintains property and casualty,
general liability, workers' compensation, environmental hazard, personal injury
and other similar types of insurance with financially sound and reputable
insurers that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and
has no knowledge of any threat by, any insurer (that has issued any insurance
policy to the Company) that
11
12
such insurer intends to deny coverage under or cancel, discontinue or not renew
any insurance policy presently in force.
Section 4.18. Environmental Matters.
1. The operations of the Company and each of its subsidiaries
are in material compliance with all applicable Environmental Laws and all
permits issued pursuant to Environmental Laws or otherwise;
2. to its knowledge, the Company and each of its subsidiaries
has obtained or applied for all material permits required under all applicable
Environmental Laws necessary to operate its business;
3. neither the Company nor either of its subsidiaries is the
subject of any outstanding written order of or agreement with any governmental
authority or person respecting (i) Environmental Laws, (ii) Remedial Action or
(iii) any Release or threatened Release of Hazardous Materials;
4. neither the Company nor either of its subsidiaries has
received, since December 31, 1997, any written communication alleging that it
may be in violation of any Environmental Law or any permit issued pursuant to
any Environmental Law, or may have any liability under any Environmental Law;
5. neither the Company nor either of its subsidiaries has any
current contingent liability in connection with any Release of any Hazardous
Materials into the indoor or outdoor environment (whether on-site or
off-site);
6. to the Company's knowledge, there are no investigations of
the business, operations, or currently or previously owned, operated or leased
property of the Company or either of its subsidiaries pending or threatened
which could lead to the imposition of any liability pursuant to any
Environmental Law;
7. there is not located at any of the properties of the Company
any (A) underground storage tanks, (B) asbestos-containing material or (C)
equipment containing polychlorinated biphenyls; and
8. the Company has provided to Investor all environmentally
related audits, studies, reports, analyses, and results of investigations that
have been performed with respect to the currently or previously owned, leased
or operated properties of the Company.
12
13
For purposes of this Section 4.18:
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.),
the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.), and the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste which is
regulated by the United States, Canada or any of its provinces, or any state or
local governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant,"
"pollutant," "toxic waste" or toxic substance" under any provision of any
Environmental Law;
"Release" means any release, spill, filtration, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (z) perform
pre-remedial studies and investigations or post-remedial monitoring and care.
Section 4.19. Labor Matters. Neither the Company nor any of its
subsidiaries is a party to any labor or collective bargaining agreement and
there are no labor or collective bargaining agreements which pertain to
employees of the Company. No employees of the Company are represented by any
labor organization and none of such employees has made a pending demand for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the Company's knowledge,
threatened to be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing activity involving the
Company pending or to the Company's knowledge, threatened by any labor
organization or group of employees of the Company. There are no (i) strikes,
work stoppages, slowdowns, lockouts or arbitrations or (ii) material grievances
or other labor disputes pending or, to the knowledge of the Company, threatened
against or involving the Company. There are no unfair labor practice charges,
grievances or complaints pending or, to the knowledge of the Company,
threatened by or on behalf of any employee or group of employees of the
Company.
13
14
Section 4.20. ERISA Matters. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all liabilities under
all Plans (based on those assumptions used to fund such Plans) did not, as of
the most recent annual valuation date applicable thereto, exceed the value of
the assets of all such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that could result in a
Material Adverse Effect. None of the Company or ERISA Affiliates has received
any notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan
is reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise.
For purposes of this Section 4.20:
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same
may be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of
which the Company is a member and which is treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code").
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Internal Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer Plan)
subject to the provision of Title IV of ERISA or Section 412 of the Internal
Revenue Code that is maintained for employees of the Company or any ERISA
Affiliate.
"Reportable Event" means any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code.
14
15
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 4.21. Tax Matters.
1. The Company has filed all Tax Returns which it is required to
file under applicable Laws; all such Tax Returns are true and accurate and have
been prepared in compliance with all applicable Laws; the Company has paid all
Taxes due and owing by it (whether or not such Taxes are required to be shown
on a Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which it is required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties; and since
December 31, 1998, the charges, accruals and reserves for Taxes with respect to
the Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that such corporation
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company; no information related
to Tax matters has been requested by any foreign, federal, state or local
taxing authority; and, except as disclosed above, no written notice indicating
an intent to open an audit or other review has been received by the Company
from any foreign, federal, state or local taxing authority. There are no
material unresolved questions or claims concerning the Company's Tax liability.
The Company (A) has not executed or entered into a closing agreement pursuant
to Section 7121 of the Internal Revenue Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; or (B) has not
agreed to or is required to make any adjustments pursuant to Section 481 (a) of
the Internal Revenue Code or any similar provision of state, local or foreign
law by reason of a change in accounting method initiated by the Company or any
of its subsidiaries or has any knowledge that the IRS has proposed any such
adjustment or change in accounting method, or has any application pending with
any taxing authority requesting permission for any changes in accounting
methods that relate to the business or operations of the Company. The Company
has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Internal Revenue Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under Section 341(f) of
the Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (A) Treas. Reg. Section
1.1502-6 (or comparable provisions of state, local or foreign law), (B) as a
transferee or successor, (C) by contract or indemnity or (D) otherwise. The
Company is not a party to any tax sharing agreement. The Company has not made
any payments, is obligated to make payments or is a party to an agreement that
could obligate it to make any payments that would not be deductible under
Section 280G of the Internal Revenue Code.
15
16
For purposes of this Section 4.21:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes of any kind whatsoever (including,
without limitation, deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
Section 4.22. Property. Neither the Company nor either of its subsidiaries
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and any real property and
buildings held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company.
Section 4.23. Intellectual Property. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures) and other similar rights
and proprietary knowledge (collectively, "Intangibles") necessary for the
conduct of its business as now being conducted. To the best of the Company's
knowledge, neither the Company nor any of its subsidiaries is infringing upon
or in conflict with any right of any other person with respect to any
Intangibles. No claims have been asserted by any person to the ownership or
use of any Intangibles and the Company has no knowledge of any basis for such
claim.
Section 4.24. Internal Controls and Procedures. The Company maintains
accurate books and records and internal accounting controls which provide
reasonable assurance that (i) all transactions to which the Company is a party
or by which its properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's assets is
compared with existing assets at regular intervals; (iii) access to the
Company's assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company is a party or by
which its properties are bound are recorded as necessary to permit preparation
of the financial statements of the Company in accordance with U.S. generally
accepted accounting principles.
16
17
Section 4.25. Payments and Contributions. Neither the Company nor any of
its directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment
or other unlawful expense relating to political activity; (ii) made any direct
or indirect unlawful payment of Company funds to any foreign or domestic
government official or employee; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
Section 4.26. Year 2000 Compliance. The Company has reviewed the Year 2000
Risk and is taking such action as may be necessary to ensure that the Year 2000
Risk will not adversely affect its business operations and/or financial
condition. As used herein, "Year 2000 Risk" means the risk that computer
applications used by the Company and its Subsidiaries and/or its suppliers,
vendors, and customers may be unable to recognize and perform without error
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999.
Section 4.27 Related Party Transactions. Other than the investment in the
Marbella, Spain clinic, neither the Company nor any of its officers, directors
or "Affiliates" (as such term is defined in Rule 12b-2 under the Exchange Act)
has borrowed any moneys from or has outstanding any indebtedness or other
similar obligations to the Company. Neither the Company nor any of its
officers, directors or Affiliates (i) owns any direct or indirect interest
constituting more than a one percent equity (or similar profit participation)
interest in, or controls or is a director, officer, partner, member or employee
of, or consultant to or lender to or borrower from, or has the right to
participate in the profits of, any person or entity which is (x) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the Company or any
of its subsidiaries, (y) engaged in a business related to the business of the
Company or any of its subsidiaries, or (z) a participant in any transaction to
which the Company is a party (other than in the ordinary course of the
Company's business) or (ii) is a party to any contract, agreement, commitment
or other arrangement with the Company.
Section 4.28. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein, not misleading.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1. Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2. Short Sales. The Investor and its affiliates shall not
engage in short sales of the Company's Common Stock; provided, however, that
the Investor may enter into any short sale or other hedging or similar
arrangement it deems appropriate with respect to Conversion Shares commencing
on the day it delivers a Conversion Notice with respect to such Conversion
Shares, so long as such arrangements do not involve more than the number of
such Conversion Shares (determined as of the date of such Conversion Notice).
17
18
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the
Conversion Shares and the Warrant Shares; such amount of shares of Common Stock
to be reserved shall be calculated based upon the Market Price therefor under
the terms of this Agreement and the Warrant respectively assuming for purposes
of this Section 6.2 a Market Price of $2.00 and shall be increased by the Board
of Directors if the Market Price declines below $2.00. The number of shares so
reserved from time to time, as theretofore increased or reduced as hereinafter
provided, may be reduced by the number of shares actually delivered hereunder
and the number of shares so reserved shall be increased or decreased to reflect
potential increases or decreases in the Common Stock that the Company may
thereafter be so obligated to issue by reason of adjustments to the Warrant.
Section 6.3. Listing of Common Stock. The Company hereby agrees to
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the date upon which the Preferred Stock
may be converted into Common Stock) to list the Conversion Shares and the
Warrant Shares. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Principal Market, it will include in such
application the Conversion Shares and the Warrant Shares, and will take such
other action as is necessary or desirable in the opinion of the investor to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible. The Company will take all action to continue the listing and
trading of its Common Stock on the Principal Market (including, without
limitation, maintaining sufficient net tangible assets) and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market and shall provide Investor with copies
of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within one business day of the
Company's receipt thereof.
Section 6.4. Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(b) or (g) of the Exchange
Act, will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act.
18
19
Section 6.5. Legends. Upon conversion, the certificates evidencing the
Common Stock to be sold by the Investor pursuant to Section 9.1 shall be free
of legends, except as set forth in Article IX.
Section 6.6. Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7. Notice of Certain Events Affecting Registration. The Company
will immediately notify the Investor upon the occurrence of any of the
following events in respect of a registration statement or related prospectus
in respect of an offering of Registrable Securities; (i) receipt of any request
for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement to be supplied by amendments or supplements to the registration
statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.
(a) Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with
or into, or a transfer of all or substantially all of the assets of the Company
to, another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Investor such shares of stock
and/or securities as the Investor is entitled to receive pursuant to this
Agreement.
Section 6.8. Issuance of Preferred Shares and Warrant Shares. The sale of
the Preferred Stock and the issuance of the Warrant Shares pursuant to exercise
of the Warrant and the Conversion Shares upon conversion of the Preferred Stock
shall be made in accordance with the provisions and requirements of Section
4(2) of Regulation D and any applicable state securities law. The Company
shall make all necessary SEC and "blue sky" filings required to be made by the
Company in connection with the sale of the Securities to the Investor as
required by all applicable Laws, and shall provide a copy thereof to the
Investor promptly after such filing.
19
20
Section 6.9 Limitation on Future Financing. The Company agrees that it
will not, without the consent of 85% in interest of the Investors, enter into
any financing at a discount to Market Price until six months after the
effective date of the Registration Statement, other than the sale of shares of
Common Stock and warrants representing a 40% equity interest in the Company to
a group of foreign investors as described in the Company's Form 10-QSB/A for
the fiscal quarter ended March 31, 1999; provided, however, anything to the
contrary appearing herein notwithstanding, neither this Section nor any other
provision hereof shall be construed to restrict or prohibit the Company's right
to restructure, amend or modify any facility existing on the date hereof that
does not materially impair the rights of the holders of the Preferred Stock.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; RELEASE
Section 7.1. Survival. The representations, warranties and covenants made
by each of the Company and Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the
Closing and the consummation of the transactions contemplated hereby. In the
event of a breach or violation of any of such representations, warranties or
covenants, the party to whom such representations, warranties or covenants have
been made shall have all rights and remedies for such breach or violation
available to it under the provisions of this Agreement or otherwise, whether at
law or in equity, irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Date.
Section 7.2. Indemnity. The Company hereby agrees to indemnify and hold
harmless the Investor, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Investor Indemnitees"), from and
against any and all losses, claims, damages, judgments, penalties, liabilities
and deficiencies (collectively, "Losses"), and agrees to reimburse the Investor
Indemnitees for all out-of-pocket expenses (including the fees and expenses of
legal counsel and the cost of any investigation and preparation), in each case
promptly as incurred by the Investor Indemnitees and to the extent arising out
of or in connection with:
1. any misrepresentation, omission of fact or breach
of any of the Company's representations or warranties contained in
this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement;
2. any failure by the Company to perform in any
material respect any of its covenants, agreements, undertakings or
obligations set forth in this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement or certificate entered
into or delivered by the Company pursuant to this Agreement; or
3. any litigation directly against the Investor by
non-affiliates of the Company relating to this Agreement and the
transactions contemplated hereby.
20
21
Investor hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees"), from and against any and all
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel and the cost of any
investigation and preparation), in each case promptly as incurred by the
Company Indemnitees and to the extent arising out of or in connection with:
1. any misrepresentation, omission of fact, or breach
of any of Investor's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Investor pursuant to this Agreement;
or
2. any failure by Investor to perform in any material
respect any of its covenants, agreements, undertakings or obligations set forth
in this Agreement or any instrument, certificate or agreement entered into or
delivered by Investor pursuant to this Agreement.
Section 7.3. Notice. Promptly after receipt by either party hereto
seeking indemnification pursuant to Section 7.2 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to Section 7.2 is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the Indemnifying Party
shall not relieve it from any liability that it otherwise may have to the
Indemnified Party, except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights and defenses by reason of
such failure. In connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party shall
have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have
agreed to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified
Party and the Indemnifying Party reasonably shall have concluded that
representation of the Indemnified Party and the Indemnifying Party by the same
legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or (z)
the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that
does not
21
22
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
Section 7.4. Direct Claims. In the event one party hereunder should have
a claim for indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall deliver notice
of such claim to the Indemnifying Party. If the Indemnified Party disputes the
claim, such dispute shall be resolved by mutual agreement of the Indemnified
Party and the Indemnifying Party.
ARTICLE VIII
DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. Due Diligence Review. The Company shall make available for
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all SEC Documents and
other filings with the SEC, and all other publicly available corporate
documents and properties of the Company as may be reasonably necessary for the
purpose of such review, and cause the Company's officers, directors and
employees to supply all such publicly available information reasonably
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with
respect to the Company and the accuracy of the Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information
(a) The Company shall not disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment
letters received from the SEC staff with respect to the Registration Statement,
the Company may, as a condition to disclosing any non-public information
hereunder, require the Investor's advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and
the Investor.
(b) Nothing herein shall require the Company to disclose
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to
22
23
money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of
the Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed
in the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IX
LEGENDS
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or
equivalent (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
Upon the execution and delivery hereof, the Company is issuing to the transfer
agent for its Common Stock (and to any substitute or replacement transfer agent
for its Common Stock upon the Company's appointment of any such substitute or
replacement transfer agent) instructions in substantially the form of Exhibit E
hereto. Such instructions shall be irrevocable by the Company from and after
the date hereof or from and after the issuance thereof to any such substitute
or replacement transfer agent, as the case may be, except as otherwise
expressly provided in the Registration Rights Agreement. It is the intent and
purpose of such instructions, as provided therein, to require the
23
24
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and
under the following circumstances and without consultation by the transfer
agent with the Company or its counsel and without the need for any further
advice or instruction or documentation to the transfer agent by or from the
Company or its counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of one
or more certificates evidencing Common Stock that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement.
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in
a manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradable
securities.
Any of the notices referred to above in this Section 9.1 may be sent by
facsimile to the Company's transfer agent.
Section 9.2. No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3. Investor's Compliance. Nothing in this Article shall affect
in any way the Investor' s obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
24
25
ARTICLE X
CHOICE OF LAW
Section 10.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to the conflicts of law principles of such state. Each party hereto hereby
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State Court sitting in
New York City for purposes of all legal proceedings arising out of or relating
to this Agreement or the transactions contemplated hereby. Each party hereto
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court has been brought in an inconvenient forum. Each party
hereto hereby irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT
Section 11.1. Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Preferred Stock purchased or acquired by the Investor hereunder with
respect to the Preferred Stock held by such person, and (b) upon the prior
written consent of the Company, which consent shall not unreasonably be
withheld or delayed, the Investor's interest in this Agreement may be assigned
at any time, in whole or in part, to any other person or entity (including any
affiliate of the Investor) who agrees to make the representations and
warranties contained in Article III and who agrees to be bound by the covenants
of Article V.
ARTICLE XII
NOTICES
Section 12.1. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be
25
26
received) or (b) on the second business day following the date of mailing by
reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Integrated Surgical Systems, Inc.
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
(shall not constitute notice) Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor: As set forth on the signature page hereto.
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 12.1 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the other
party hereto.
ARTICLE XIII
TERMINATION
Section 13.1. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and the Investor.
Section 13.2. Termination by the Company or the Investors. This Agreement
may be terminated and the transactions contemplated hereby may be abandoned by
action of the Company or the Investors if (i) the Closing shall not have
occurred at or prior to 5:00 p.m., New York City time, on July 30, 1999;
provided, however, that the right to terminate this Agreement pursuant to this
Section 13.2 shall not be available to any party whose failure to fulfill any
of its obligations under this Agreement has been the cause of or resulted in
the failure of the Closing to occur at or before such time and date or (ii) any
court or public or governmental authority shall have issued an order, ruling,
26
27
judgment or writ, or there shall be in effect any law, restraining, enjoining
or otherwise prohibiting the consummation of any of the transactions
contemplated by this Agreement.
Section 13.3. Termination by the Investors. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by the
Investors at any time prior to the Closing Date, if (i) the Company shall have
failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement, (ii) there shall have been a breach by
the Company with respect to any representation or warranty made by it in this
Agreement or (iii) there shall be in existence any condition, having or
reasonably and forseeably likely to have a Material Adverse Effect.
Section 13.4. Termination by the Company. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned by the Company at any
time prior to the Closing Date, if (i) the Investors shall have failed to
comply in any material respect with any of their respective covenants or
agreements contained in this Agreement or (ii) there shall have been a breach
by the Investors with respect to any representation or warranty made by them in
this Agreement.
Section 13.5. Fees and Expenses of Termination. If this Agreement is
terminated for any reason, the Company shall reimburse the Investors for all of
the Investor's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement (including, but not limited to, the
fees and disbursements of Investor's legal counsel as set forth in Section
14.7).
ARTICLE XIV
MISCELLANEOUS
Section 14.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 14.2. Entire Agreement. This Agreement, the Exhibits hereto, which
include, but are not limited to the Warrant, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the
parties, both oral and written relating to the subject matter hereof. The terms
and conditions of all Exhibits to this Agreement are incorporated herein by
this reference and shall constitute part of this Agreement as is fully set
forth herein.
Section 14.3. Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this
27
28
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 14.4. Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 14.5. Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting
entity.
Section 14.6. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Preferred Stock or any Conversion
Shares or Warrant or any Warrant Shares and (ii) in the case of any such loss,
theft or destruction of such certificate, upon delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
(which shall not exceed that required by the Company's transfer agent in the
ordinary course) or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new certificate of like tenor.
Section 14.7. Fees and Expenses. Each of the Company and the Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Investor's counsel in an amount not to exceed $3,000.
28
29
Section 14.8. Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party except
for Trinity Capital Advisors, Inc. as set forth on the Schedule of Exceptions,
whose fee shall be paid by the Company. The Company on the one hand, and the
Investor, on the other hand, agree to indemnify the other against and hold the
other harmless from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
INTEGRATED SURGICAL SYSTEMS, INC.
By:
----------------------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer and President
Jurisdiction of Incorporation
of Investor: INVESTOR
----------------- Name:
Address: -----------------------------------
----------------------- By:
----------------------- -----------------------------------
----------------------- Title:
-----------------------------------
Telephone: Authorized Signatory
--------------------
Telecopier:
--------------------
Amount of investment: $
---------
29
30
EXHIBIT A
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES E CONVERTIBLE PREFERRED STOCK OF
INTEGRATED SURGICAL SYSTEMS, INC.
PURSUANT TO SECTION 151 OF THE DELAWARE
GENERAL CORPORATION LAW
Integrated Surgical Systems, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (hereinafter the "Corporation"), in accordance with the provisions of
Section 151(g) thereof, DOES HEREBY CERTIFY that at a meeting of the Board of
Directors of the Corporation duly held on July 15, 1999:
FIRST: The following resolution was duly adopted by the Board of
Directors of the Corporation:
"RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Corporation by Article 4 of the Corporation's restated
certificate of incorporation, as amended (the "Certificate of Incorporation"), a
series of Preferred Stock of the Corporation be, and it hereby is, created out
of the authorized but unissued shares of the capital stock of the Corporation,
such series to be designated Series E Convertible Preferred Stock (the "Series E
Convertible Preferred Stock"), to consist of 3,000 shares, par value $0.01 per
share, of which the preferences and relative and other rights, and the
qualifications, limitations or restrictions thereof, shall be as set forth in
the Certificate of Designations annexed hereto:
1. NUMBER OF SHARES OF SERIES E CONVERTIBLE PREFERRED STOCK. Of the
992,730 shares of authorized but unissued Preferred Stock, $0.01 par value
("Preferred Stock") of the Corporation, three thousand (3,000) shares shall be
designated and known as Series E Convertible Preferred Stock, par value $0.01
per share ("Series E Convertible Preferred Stock").
2. VOTING.
(a) Unless required by law, no holder of any shares of Series
E Convertible Preferred Stock shall be entitled to vote at any meeting of
stockholders of the Corporation (or any written actions of stockholders in lieu
of meetings) with respect to any matters presented to the stockholders of the
Corporation for their action or consideration. Notwithstanding the foregoing,
the Corporation shall provide each holder of record of Series E Convertible
Preferred Stock with timely notice of every meeting of stockholders of the
Corporation and shall provide each holder with copies of all proxy materials
distributed in connection therewith.
31
(b) So long as shares of Series E Convertible Preferred Stock
are outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by the Delaware General Corporation
Law) of the holders of at least 85% of the then outstanding shares of Series E
Convertible Preferred Stock:
(i) alter or change the rights, preferences or
privileges of the Series E Convertible Preferred Stock;
(ii) create any new class or series of capital stock
ranking on a parity with ("Pari Passu Securities") or a preference over the
Series E Convertible Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation ("Senior Securities")
or alter or change the rights, preferences or privileges of any Senior
Securities so as to affect adversely the Series E Convertible Preferred Stock;
(iii) increase the authorized number of shares of
Series E Convertible Preferred Stock; or
(iv) do any act or thing not authorized or
contemplated by this Certificate of Designations which would result in taxation
of the holders of shares of the Series E Convertible Preferred Stock under
Section 305 of the Internal Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter from time to time amended).
In the event holders of at least 85% of the then outstanding
shares of Series E Convertible Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series E
Convertible Preferred Stock, pursuant to subsection (b) above, so as to affect
the Series E Convertible Preferred Stock, then the Corporation will deliver
notice of such approved change to the holders of the Series E Convertible
Preferred Stock that did not agree to such alteration or change (the "Dissenting
Holders") and Dissenting Holders shall have the right for a period of thirty
(30) days to convert any and all shares of then held Series E Convertible
Preferred Stock pursuant to the terms of this Certificate of Designations as in
effect prior to such alteration or change, or else to continue to hold their
shares of Series E Convertible Preferred Stock.
3. DIVIDENDS.
No holder of any shares of Series E Convertible Preferred
Stock shall be entitled to receive any dividends.
4. LIQUIDATION.
(a) If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law,
3
32
or consent to the entry of an order for relief in an involuntary case under any
law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidating Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation upon liquidation, dissolution or winding up
unless prior thereto, the holders of shares of Series E Convertible Preferred
Stock shall have received the Liquidation Preference (as defined in Article
4(c)) with respect to each share. If upon the occurrence of a Liquidation Event,
the assets and funds available for distribution among the holders of the Series
E Convertible Preferred Stock and holders of Pari Passu Securities shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series E Convertible Preferred Stock and the
Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that that Liquidation Preference payable on each such
share bears to the aggregate Liquidation Preference payable on all such shares.
(b) At the option of each holder of the Series E
Convertible Preferred Stock, the sale, conveyance of disposition of all or
substantially all of the assets of the Corporation, the effectuation by the
Corporation of a transaction or series or related transactions in which more
than 50% of the voting power of the Corporation is disposed of, or the
consolidation, merger or other business combination of the Corporation with or
into any other Person or Persons when the Corporation is not the survivor shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
pursuant to which the Corporation shall be required to distribute, upon
consummation of and as a condition to such transaction an amount equal to the
Liquidation Preference with respect to each outstanding share of Series E
Convertible Preferred Stock held by such Holder in accordance with and subject
to the terms of this Article 4.
(c) The Liquidation Preference shall be the Stated
Value of $1,000 per share of Series E Convertible Preferred Stock.
(d) The Series E Convertible Preferred Stock shall
rank on a parity with the Corporation's Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock Series C Convertible Preferred Stock and
Series D Convertible Preferred Stock as to the
4
33
distribution of the assets of the Corporation upon liquidation, dissolution or
winding up of the Corporation.
5. OPTIONAL CONVERSION. The holders of shares of Series E Convertible
Preferred Stock shall have the following conversion rights:
(a) RIGHT TO CONVERT; CONVERSION PRICE. Subject to the terms,
conditions, and restrictions of this Paragraph 5, the holder of any shares of
Series E Convertible Preferred Stock shall have the right to convert each such
share of Series E Convertible Preferred Stock (except that upon any liquidation
of the Corporation, the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amount distributable on
the Series E Convertible Preferred Stock) into an amount of shares of Common
Stock equal to the Stated Value of such share or shares of Series E Convertible
Preferred Stock divided by (i) the lowest price at which a trade of the Common
Stock is executed, as reported by Bloomberg L.P., on the principal market for
the Corporation's Common Stock (the "Principal Market") during the period of
five Trading Days ending with the last Trading Day prior to the date of
conversion (the "Market Price"), after (ii) discounting the Market Price by 15%
to determine the conversion price (the "Conversion Price"). To illustrate, if
the Market Price as of the Conversion Date is $3.00 and 100 shares of Series E
Convertible Preferred Stock are being converted, the Stated Value for which
would be $100,000, then the Conversion Price shall be $2.55 per share of Common
Stock ($3.00 x .85), whereupon the Stated Value of $100,000 of Series E
Convertible Preferred Stock would entitle the holder thereof to convert the 100
shares of Series E Convertible Preferred Stock into 39,216 shares of Common
Stock ($100,000 divided by $2.55 equals 39,216). However, in no event shall the
Conversion Price be greater than 150% of the lowest price at which a trade of
the Common Stock is executed, as reported by Bloomberg L.P., on the Principal
Market during the period of five Trading Days ending with the last Trading Day
prior to the date upon which the Series E Convertible Preferred Stock was
originally issued (the "Maximum Conversion Price"). In addition, if the
Conversion Price on any date of conversion (a "Conversion Date") is less than
$3.00, then instead of issuing shares of Common Stock upon conversion, upon
prior written notice to the holder, the Corporation may elect to pay the holder
an amount in cash equal to (i) the closing sale price on the Principal Market on
the day prior to the Conversion Date multiplied by (ii) the number of shares of
Common Stock which would otherwise be issuable to the holder upon such
conversion, or any combination of cash and shares of Common Stock. If notice of
the Corporation's election to pay the holder in cash is not received by the
holder prior to the receipt by the Corporation of a Conversion Notice, the
Corporation shall pay the holder in shares of Common Stock.
(b) CONVERSION DATE. (i) The holder of any shares of Series E
Convertible Preferred Stock may convert such shares into shares of Common Stock
commencing on the earlier of (A) ninety days after the date upon which the
Series E Convertible Preferred Stock was originally issued (the "Original
Issuance Date") and (B) the date a registration statement for the resale of the
shares of Common Stock issuable upon conversion of the Series E Convertible
Preferred Stock is declared effective by the Securities and Exchange Commission.
5
34
(ii) No shares of Series E Convertible Preferred
Stock may be converted into Common Stock, to the extent that, after giving
effect to the conversion and issuance of the Common Stock to be issued pursuant
to the applicable Conversion Notice (as defined in Paragraph 5(c) below), the
total number of shares of Common Stock deemed beneficially owned by the holder
requesting conversion (other than by virtue of the ownership of unconverted
shares of Series E Convertible Preferred Stock or the ownership of other
securities that have limitations on a holder's rights to exchange, convert or
exercise similar to those limitations set forth herein), together with all
shares of Common Stock deemed beneficially owned by such holder's Affiliates (as
defined in Rule 405 of the Securities Act of 1933, as amended) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder, would exceed 5% of the total issued and outstanding shares of Common
Stock. If any court of competent jurisdiction shall determine that the foregoing
limitation is ineffective to prevent a holder from being deemed the beneficial
owner of more than 5% of the then outstanding shares of Common Stock, then the
Corporation shall redeem so many of such holder's shares of Series E Convertible
Preferred Stock pursuant to Paragraph 7(a) hereof as are necessary to cause such
holder to be deemed the beneficial owner of not more than 5% of the then
outstanding shares of Common Stock.
(iii) Unless the Corporation shall have obtained the
approval of its voting stockholders to such issuance, if required in accordance
with the rules of the Principal Market, the Corporation shall not issue shares
of Common Stock upon conversion of any shares of Series E Convertible Preferred
Stock if such issuance of Common Stock, when added to the number of shares of
Common Stock previously issued by the Corporation upon conversion of shares of
the Series E Convertible Preferred Stock, together with shares of Common Stock
issued and issuable upon exercise of warrants issued in connection with the sale
of shares of Series E Convertible Preferred Stock, would result in the issuance
of more than 19.9% of the number of shares of Common Stock which were issued and
outstanding on the Original Issuance Date. To the extent the number of shares of
Common Stock issuable upon conversion would but for the limitation set forth in
this Paragraph 5(b)(iii) exceed such limit, the Corporation shall redeem
promptly (but not later than the fifth Trading Day after receipt of the
applicable Conversion Notice) the shares of Series C Convertible Preferred Stock
that may not be converted into shares of Common Stock as a result of such
limitation for an amount in cash equal to the greater of (i) $1,500 per share of
Series E Convertible Preferred Stock and (ii) an amount equal to the product of
the closing sale price of a share of Common Stock on the Trading Date
immediately preceding of the date of the Conversion Notice and the number of
shares of Common Stock into which such shares of Series E Convertible Preferred
Stock could have been converted but for such limitation on the date of the
Conversion Notice. If the Corporation fails to effect such redemption by the
fifth Trading Day after the receipt of the applicable Conversion Notice, it
shall call a special meeting of stockholders to be held not later than 75 days
thereafter.
(c) NOTICE OF CONVERSION. The right of conversion shall be
exercised by the holder thereof by giving written notice (the "Conversion
Notice") to the Corporation, by
6
35
facsimile or by registered mail or overnight delivery service, with a copy by
facsimile to the Corporation's then transfer agent for its Common Stock, as
designated by the Corporation from time to time, that the holder elects to
convert a specified number of shares of Series E Convertible Preferred Stock
representing a specified Stated Value thereof into Common Stock and, if such
conversion will result in the conversion of all of such holder's shares of
Series E Convertible Preferred Stock, by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series E
Convertible Preferred Stock) at any time during its usual business hours on the
date set forth in the Conversion Notice, together with a statement of the name
or names (with address) in which the certificate or certificates for shares of
Common Stock shall be issued. The Conversion Notice shall include therein the
Stated Value of shares of Series E Convertible Preferred Stock to be converted,
and a calculation (i) of the Market Price, (ii) the Conversion Price, and (iii)
the number of shares of Common Stock to be issued in connection with such
conversion.
(d) ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED. (i)
Promptly, but in no event more than three business days, after the receipt of
the Conversion Notice referred to in Subparagraph 5(c) (and surrender of the
certificate or certificates for the share or shares of Series E Convertible
Preferred Stock to be converted within three business days after the receipt of
the Conversion Notice, if requested), the Corporation shall issue and deliver,
or cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock into which such shares of Series E Convertible
Preferred Stock are converted. To the extent permitted by law, such conversion
shall be deemed to have been effected on the date on which such Conversion
Notice shall have been received by the Corporation and at the time specified
stated in such Conversion Notice, which must be during the calendar day of such
notice, and at such time the rights of the holder of such share or shares of
Series E Convertible Preferred Stock shall cease, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby. Issuance of shares of
Common Stock issuable upon conversion which are requested to be registered in a
name other than that of the registered holder shall be subject to compliance
with all applicable federal and state securities laws.
(ii) The Corporation understands that a delay in the issuance
of the shares of Common Stock beyond three business days could result in
economic loss to the holder. As compensation to the holder for such loss, the
Corporation agrees to pay late payments to the holder for late issuance of
shares of Common Stock upon conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days beyond
three (3) business days from the date of receipt of the Conversion Notice):
7
36
No. Business Days Xxxx Xxxx Payment For Each
$5,000 of Liquidation Preference
Amount Being Converted
------------------------------------------------------ ----------------------------------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business Day
Late beyond 10 days
The Corporation shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit holder's
right to pursue injunctive relief and/or actual damages for the Corporation's
failure to issue and deliver Common Stock to the holder. Furthermore, in
addition to any other remedies which may be available to the holder, in the
event that the Corporation fails for any reason to effect delivery of such
shares of Common Stock within five business days the date of receipt of the
Conversion Notice, the holder will be entitled to revoke the relevant Conversion
Notice by delivering a notice to such effect to the Corporation whereupon the
Corporation and the holder shall each be restored to their respective positions
immediately prior to delivery of such Conversion Notice.
(iii) If, at any time (a) the Corporation challenges,
disputes or denies the right of the holder to effect the conversion of the
Series E Convertible Preferred Stock into Common Shares or otherwise dishonors
or rejects any Conversion Notice delivered in accordance with this Section 5 or
(b) any third party who is not and has never been an Affiliate of the holder
commences any lawsuit or proceeding or otherwise asserts any claim before any
court or public or governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of the holder hereof to effect
the conversion of the Series E Convertible Preferred Stock into Common Stock,
then the holder shall have the right, by written notice to the Corporation, to
require the Corporation to promptly (but not later than the fifth Trading Day
after receipt of such notice) redeem the Series E Convertible Preferred Stock
for cash at a redemption price equal to one hundred thirty-five percent (135%)
of the Stated Value thereof (the "Mandatory Purchase Amount"). Under any of the
circumstances set forth above, the Corporation shall be responsible for the
payment of all costs and expenses of the holder, including reasonable legal fees
and expenses, as and when incurred in disputing any such action or pursuing its
rights hereunder (in addition to any other rights of the holder).
(iv) The holder shall be entitled to exercise its
conversion privilege notwithstanding the commencement of any case under 11
U.S.C. Section 101 et seq. (the "Bankruptcy Code"). In the event the Corporation
is a debtor under the Bankruptcy Code, the Corporation
8
37
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. Section 362 in respect of the holder's conversion privilege. The
Corporation hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. Section 362 in respect of the conversion of the
Series E Convertible Preferred Stock. The Corporation agrees, without cost or
expense the holder, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. Section 362.
(e) FRACTIONAL SHARES. No fractional shares shall be issued
upon conversion of Series E Convertible Preferred Stock into Common Stock. All
fractional shares shall be rounded up to the nearest whole share.
(f) REORGANIZATION OR RECLASSIFICATION. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, or, in the case of any consolidation, merger or mandatory share exchange
of the Corporation into any other company, then, as a condition of such
reorganization, reclassification or exchange, lawful and adequate provisions
shall be made whereby each holder of a share or shares of Series E Convertible
Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Series E Convertible Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization, reclassification or exchange not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustments of the conversion
rights) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
of such conversion rights.
(g) ADJUSTMENTS FOR SPLITS, COMBINATIONS, ETC. The Conversion
Price and the number of shares of Common Stock into which the Series E
Convertible Preferred Stock shall be convertible shall be adjusted for stock
splits, combinations, or other similar events. Additionally, an adjustment will
be made in the case of an exchange of Common Stock, consolidation or merger of
the Company with or into another corporation or sale of all or substantially all
of the assets of the Company in order to enable the holder of Series E
Convertible Preferred Stock to acquire the kind and the number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been issued upon
the conversion of the Series E Convertible Preferred Stock. No adjustment to the
Conversion Price will be made for dividends (other than stock dividends), if
any, paid on the Common Stock or for securities issued pursuant to exercise for
fair value of options, warrants, or restricted stock.
(h) ADJUSTMENTS TO CONVERSION RATIO. For so long as any shares
of Series E Convertible Preferred Stock are outstanding, but no later than one
year from the effective date of a registration statement registering for resale
by the holders the shares of Common Stock issuable upon conversion of the Series
E Convertible Preferred Stock, if the Corporation (i) issues and sells pursuant
to an exemption from registration under the Securities Act (A) Common Stock at a
9
38
purchase price on the date of issuance thereof that is lower than the Conversion
Price at such date (other than shares of Common Stock issued upon conversion of
the Corporation's convertible preferred stock outstanding on the Original
Issuance Date, shares of Common Stock proposed to be issued to a group of
foreign investors, as described in the Company's Form 10-QSB/A for the fiscal
quarter ended March 31, 1999 and shares of Common Stock issued upon exercise of
warrants issued to those foreign investors, or in connection with the exercise
of any warrants or options outstanding on the Original Issuance Date or pursuant
to the Corporation's 1998 Employee Stock Purchase Plan), (B) warrants or options
with an exercise price on the date of issuance of the warrants or options that
is lower than the Conversion Price on such date (other than options and stock
awards granted pursuant to the Corporation's 1995 and 1998 Stock Option Plans or
the warrants proposed to be issued to the group of foreign investors referred to
in clause (A) above), or (C) convertible, exchangeable or exercisable securities
with a right to convert, exchange or exercise at lower than the Conversion Price
on the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities (other than the warrants proposed to be
issued to the group of foreign investors referred to in clause (A) above or
options and stock awards granted pursuant to the Corporation's 1995 and 1998
Stock Option Plans); and (ii) grants the right to the purchaser(s) thereof to
demand that the Corporation register under the Securities Act such Common Stock
issued or the Common Stock for which such warrants or options may be exercised
or such convertible, exchangeable or exercisable securities may be converted,
exercised or exchanged, then the Conversion Price shall be reduced to a rate
equal to the lowest of any lower rates since the most recently received
Conversion Notice, and such Adjusted Conversion Price shall apply to any future
Conversion Notices received by the Corporation, unless the unadjusted Conversion
Price would be lower than the Adjusted Conversion Price. The Adjusted Conversion
Price as it may exist from time to time shall not apply retroactively to any
shares of Series E Convertible Preferred Stock converted prior to the
implementation of such Adjusted Conversion Price. Notwithstanding the foregoing,
the Corporation may issue up to an aggregate total of Three Hundred Thousand
(300,000) shares of Common Stock (subject to adjustment only for stock splits,
stock dividends and reverse stock splits) at any price determined by the Board
of Directors, after the Original Issuance Date, without causing an Adjusted
Conversion Price.
6. MANDATORY CONVERSION.
(a) MANDATORY CONVERSION DATE. If on or after the third
anniversary of the Original Issuance Date (such date as selected by the
Corporation being the "Mandatory Conversion Date"), there remain issued and
outstanding any shares of Series E Convertible Preferred Stock, then the
Corporation shall be entitled to require all (but not less than all) holders of
shares of Series E Convertible Preferred Stock then outstanding to convert their
shares of Series E Convertible Preferred Stock into shares of Common Stock or,
at the option of the Corporation, to buy out all such holders in cash, at the
price set forth in Paragraph 5(a). The Corporation shall provide written notice
(the "Mandatory Conversion Notice") to the holders of shares of Series E
Convertible Preferred Stock of such mandatory conversion or such mandatory
buy-out. The Mandatory Conversion Notice shall include (i) the Stated Value of
the shares of Series E Convertible Preferred Stock to be converted or bought
out, (ii) the Conversion Price at the Mandatory Conversion Date, and (iii) the
number of shares of the Corporation's Common Stock to be issued (or the amount
of cash to be paid in the event of a buy-out) upon such
10
39
mandatory conversion or such mandatory buy-out at the then applicable Conversion
Price. Notwithstanding the foregoing, in no event shall the Corporation convert
that portion of the Series E Convertible Preferred Stock to the extent that the
issuance of Common Stock upon the conversion of such Series E Convertible
Preferred Stock, when combined with shares of Common Stock received upon other
conversions of Series E Convertible Preferred Stock and exercise of the warrants
issued in connection with the purchase of Series E Convertible Preferred Stock
by such holder and any other holders of Series E Convertible Preferred Stock,
would exceed 19.99% of the Common Stock outstanding on the Original Issuance
Date, or as to any individual holder, make such holder the beneficial owner of
5% or more of the Company's then outstanding Common Stock.
(b) SURRENDER OF CERTIFICATES. On or before the Mandatory
Conversion Date, each holder of shares of Series E Convertible Preferred Stock
shall surrender his or its certificate or certificates for all such shares to
the Corporation at the place designated in such Mandatory Conversion Notice (or
an affidavit of lost certificate in form and content reasonably satisfactory to
the Corporation), and shall thereafter receive certificates for the number of
shares of Common Stock to which such holder is entitled or, in the event of a
buy-out by the Corporation, the amount of cash to which such holder is entitled
within three business days. On the Mandatory Conversion Date, all rights with
respect to the Series E Convertible Preferred Stock so converted, including the
rights, if any, to receive notices and vote, will terminate. All certificates
evidencing shares of Series E Convertible Preferred Stock that are required to
be surrendered for conversion in accordance with the provisions hereof, from and
after the Mandatory Conversion Date, shall be deemed to have been retired and
cancelled, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation may
thereafter take such appropriate action as may be necessary to reduce the
authorized Series E Convertible Preferred Stock accordingly.
7. REDEMPTION OF SERIES E CONVERTIBLE PREFERRED STOCK.
(a) RIGHT TO REDEEM SERIES E CONVERTIBLE PREFERRED STOCK. At
any time, and from time to time, on and after the expiration of the earlier of
(i) six months from the Original Issuance Date or (ii) the closing of a
registered firm-commitment underwritten secondary offering of equity securities
by the Corporation for cash, the Corporation may, in its sole discretion, but
shall not be obligated to, redeem, in whole or in part, the then issued and
outstanding shares of Series E Convertible Preferred Stock, at a price (the
"Redemption Price") equal to the greater of (x) $1,500 per share of such Series
E Convertible Preferred Stock and (y) an amount equal to the product of the
closing sale price of a share of Common Stock on the Trading Day prior to the
date of the Redemption Notice (as hereinafter defined) and the number of shares
of Common Stock into which such shares of Series E Convertible Preferred Stock
could be converted on the date of the Redemption Notice.
(b) NOTICE OF REDEMPTION. The Corporation shall provide each
holder of record of the Series E Convertible Preferred Stock being redeemed with
written notice of redemption (the "Redemption Notice") not less than 30 days
prior to any date stipulated by the Corporation for the redemption of the Series
E Convertible Preferred Stock (the "Redemption Date"). The Redemption Notice
shall contain (i) the Redemption Date, (ii) the number of shares of Series E
Convertible Preferred Stock to be redeemed from the holder to whom the
11
40
Redemption Notice is delivered, (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of Series
E Convertible Preferred Stock to be redeemed, and (iv) a procedure for the
holder to specify the number of shares of Series E Convertible Preferred Stock
to be converted into Common Stock pursuant to Paragraph 5.
(c) RIGHT TO CONVERT SERIES E CONVERTIBLE PREFERRED STOCK UPON
RECEIPT OF REDEMPTION NOTICE. Upon receipt of the Redemption Notice, the
recipient thereof shall have the option, at its sole election, to specify what
portion of the Series E Convertible Preferred Stock called for redemption in the
Redemption Notice shall be redeemed as provided in this Paragraph 7 or converted
into Common Stock in the manner provided in Paragraph 5. If the holder of the
Series E Convertible Preferred Stock called for redemption elects to convert any
of such shares, then such conversion shall take place on the Conversion Date
specified by the holder, but in no event after the Redemption Date, in
accordance with the terms of Paragraph 5.
(d) SURRENDER OF CERTIFICATES; PAYMENT OF REDEMPTION PRICE. On
or before the Redemption Date, each holder of the shares of Series E Convertible
Preferred Stock to be redeemed shall surrender the required certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and upon payment to the holder of
the Redemption Price, each such surrendered certificate shall be cancelled and
retired. If payment of such redemption price is not made in full by the
Redemption Date the Holder shall again have the right to convert the Series E
Convertible Preferred Stock as provided in Paragraph 5 hereof. If a certificate
is surrendered and all the shares evidenced thereby are not being redeemed, the
Corporation shall issue new certificates to be registered in the names of the
person(s) whose name(s) appear(s) as the owners on the respective surrendered
certificates and deliver such certificate to such person(s).
8. NOTICES. In case at any time:
(a) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other pro rata distribution to the
holders of its Common Stock; or
(b) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights; or
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all
its assets to, another entity or entities; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by telex or facsimile or by recognized overnight
delivery service to non-U.S. residents, addressed to each holder of any shares
of Series E Convertible Preferred Stock at the
12
41
address of such holder as shown on the books of the Corporation, (i) at least 10
days' prior written notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 10 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (i) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto
and (ii) shall also specify the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
9. STOCK TO BE RESERVED. The Corporation, upon the effective
date of this Certificate of Designations, has a sufficient number of shares of
Common Stock available to reserve for issuance upon the conversion of all
outstanding shares of Series E Convertible Preferred Stock. The Corporation will
at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the conversion of Series E Convertible
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of Series E
Convertible Preferred. The Corporation covenants that all shares of Common
Stock which shall be so issued shall be duly and validly issued, fully paid and
non-assessable. The Corporation will take all such action as may be so taken
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed to
have a sufficient number of authorized but unissued shares of Common Stock to
issue upon conversion of the Series E Convertible Preferred Stock. The
Corporation will not take any action which results in any adjustment of the
conversion rights if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Series E Convertible Preferred
Stock would exceed the total number of shares of Common Stock then authorized by
the Corporation's Restated Certificate of Incorporation, as amended.
10. NO REISSUANCE OF SERIES E CONVERTIBLE PREFERRED STOCK.
Shares of Series E Convertible Preferred Stock which are converted into shares
of Common Stock as provided herein shall not be reissued.
11. ISSUE TAX. The issuance of certificates for shares of
Common Stock upon conversion of Series E Convertible Preferred Stock shall be
made without charge to the holder for any United States issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series E Convertible Preferred Stock which is being converted.
12. CLOSING OF BOOKS. The Corporation will at no time close
its transfer books
13
42
against the transfer of any Series E Convertible Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series E Convertible Preferred Stock in any manner which interferes with the
timely conversion of such Series E Convertible Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
13. DEFINITIONS. As used in this Certificate of Designations,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, $0.01 par value, as constituted on the date of filing of these
terms of the Series E Convertible Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
neither be limited to a fixed sum or percentage of par value in respect of the
rights of the holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series E
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization, reclassification, or stock split of the outstanding shares
thereof, the stock, securities or assets provided for in Subparagraph 5(f) and
(g). Any capitalized terms used in this Certificate of Designations but not
defined herein shall have the meanings set forth in that certain Preferred Stock
Purchase Agreement among the Corporation and the other persons signatory thereto
relating to the issuance and sale of the Series E Convertible Preferred Stock to
the holders of the Series E Convertible Preferred Stock on the Original Issuance
Date, a copy of which will be provided to any stockholder of the Corporation
upon request to the Secretary of the Corporation, without charge.
14. LOSS, THEFT, DESTRUCTION OF PREFERRED STOCK. Upon receipt
of evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of certificates representing shares of Series E Convertible Preferred
Stock and, in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (which shall not include
the posting of any bond), or, in the case of any such mutilation, upon surrender
and cancellation of the Series E Convertible Preferred Stock certificate, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated certificates for Series E Convertible Preferred Stock,
new certificates for Series E Convertible Preferred Stock of like tenor.
15. WHO DEEMED ABSOLUTE OWNER. The Corporation may deem the
person in whose name the Series E Convertible Preferred Stock shall be
registered upon the registry books of the Corporation to be, and may treat it
as, the absolute owner of the Series E Convertible Preferred Stock for the
purpose of conversion of the Series E Convertible Preferred Stock and for all
other purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon the Series E Convertible Preferred
Stock to the extent of the sum or sums so paid or the conversion so made.
16. REGISTER. The Corporation shall keep at its principal
office a register in
14
43
which the Corporation shall provide for the registration of the Series E
Convertible Preferred Stock. Upon any transfer of the Series E Convertible
Preferred Stock in accordance with the provisions hereof, the Corporation shall
register such transfer on the Series E Convertible Preferred Stock register.
17. WITHHOLDING. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
E Convertible Preferred Stock.
18. HEADINGS. The headings of the Sections of this Certificate
of Designations are inserted for convenience only and do not constitute a part
of this Certificate of Designations.
IN WITNESS WHEREOF, Xxxxxx X. Xxxxxxx, Chief Executive Officer and
President of the Corporation, under penalties of perjury, does hereby declare
and certify that this is the act and deed of the Corporation and the facts
stated herein are true and accordingly has signed this Certificate of
Designations as of this 23rd day of July, 1999.
INTEGRATED SURGICAL SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Chief Executive Officer and President
15
44
EXHIBIT B
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN
OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT OR THE SHARES
ISSUABLE UPON EXERCISE HEREOF IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS,
OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS; AND
IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE WARRANT OR
SUCH SHARES, WHICH OPINION AND WHICH COUNSEL SHALL BE SATISFACTORY TO THE
COMPANY IN ITS SOLE DISCRETION.
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
------------
INTEGRATED SURGICAL SYSTEMS, INC.
THIS CERTIFIES that, for value received,___________________________
_________________________ (the "Holder"), is entitled, upon the terms and
subject to the conditions hereinafter set forth, at any time on or after January
____, 2000 and on or prior to January ___, 2004 (the "Termination Date") but not
thereafter, to subscribe for and purchase from INTEGRATED SURGICAL SYSTEMS,
INC., a corporation incorporated in Delaware (the "Company"),
_____________________ (____________) shares (the "Warrant Shares") of Common
Stock, par value US $0.01 per share of the Company (the "Common Stock"). The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be equal to One Hundred Thirty (130%) percent of the Market Price
on the Closing Date (as those terms are defined in the Preferred Stock Purchase
Agreement dated as of July _______, 1999 ("Agreement"), between the Company and
the Holder), as reported by Bloomberg, L.P. The Exercise Price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein. This Warrant is being issued in connection with the Agreement
and is subject to its terms and conditions. In the event of any conflict between
the terms of this Warrant and the Agreement, the Agreement shall control.
45
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. (a) Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times, before the close of business on the Termination Date, or such
earlier date on which this Warrant may terminate as provided in this Warrant, by
the surrender of this Warrant and the Notice of Exercise Form annexed hereto
duly executed, at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company) and
upon payment of the Exercise Price of the shares thereby purchased by cash,
check or bank draft payable to the Company or by wire transfer or cashier's
check drawn on a United States bank; whereupon the holder of this Warrant shall
be entitled to receive a certificate for the number of shares of Common Stock so
purchased. Certificates for shares purchased hereunder shall be delivered to the
holder hereof within three (3) business days after the date on which this
Warrant shall have been exercised as aforesaid. Payment of the Exercise Price of
the shares may be by certified check or cashier's check or by wire transfer to
an account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised by payment to the Company of the
Warrant purchase price and all taxes required to be paid by Holder, if any,
pursuant to Section 5 prior to the issuance of such shares have been paid. If
this Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
(b) The Holder shall be entitled to exercise the Warrant
notwithstanding the commencement of any case under 11 U.S.C. Section 101 et seq.
(the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. Section 362 in respect of the
Holder's exercise right. The Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. Section 362 in
respect of the exercise of the Warrant. The Company agrees, without cost or
expense to the Holder, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. Section 362.
2
46
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of the
Market Price per share of Common Stock as of the Closing Date.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with
any applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new Holder for
the purchase of shares of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by Holder or its agent or attorney.
Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
3
47
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 7.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be and be deemed to be issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
11. (a) Adjustments of Exercise Price and Number of Warrant Shares.
The number and kind of securities purchasable upon the exercise of this Warrant
and the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following. In case the Company shall (i) declare or pay
a dividend in shares of Common Stock or make a distribution in shares of Common
Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the holder of this Warrant shall be entitled
to receive the kind and number of Warrant Shares or other securities of the
Company which he would have owned or have been entitled to receive had such
Warrant been exercised in advance thereof. Upon each such adjustment of the kind
and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the holder of this Warrant shall thereafter be entitled
to purchase the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per such Warrant Share or other security
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing by the number of Warrant
Shares or other securities of the Company resulting from such adjustment. An
adjustment made pursuant to this paragraph shall become effective immediately
after the effective date of such event retroactive to the record date, if any,
for such event.
4
48
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 11. For purposes of
this Section 11, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 11 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(c) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Exercise Price to be less than the
par value per share of Common Stock.
12. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments
5
49
setting forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
14. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any evidences of
its indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property, assets
or business of the Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 30
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17(d).
6
50
15. Authorized Shares. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of NASDAQ or any domestic
securities exchange upon which the Common Stock may be listed.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant and
the obligations of the Company hereunder.
Before taking any action which would cause an adjustment
reducing the current Exercise Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Exercise Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
7
51
16. Required Registration. Pursuant to the terms and conditions set
forth in the Registration Rights Agreement entered into between the Company and
the Holders as of the date of issuance of this Warrant, the Company shall
prepare and file with the Commission not later than the 45th day after the
Closing Date, a Registration Statement relating to the offer and sale of the
Common Stock issuable upon exercise of the Warrants and shall use its best
efforts to cause the Commission to declare such Registration Statement effective
under the Securities Act as promptly as practicable but no later than 90 days
after the closing date.
17. Miscellaneous.
(a) Issue Date; Jurisdiction. The provisions of this Warrant
shall be construed and shall be given effect in all respects as if it had been
issued and delivered by the Company on the date hereof. This Warrant shall be
binding upon any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws of New York without regard to its conflict
of law, principles or rules, and be subject to arbitration pursuant to the terms
set forth in the Agreement.
(b) Restrictions. The holder hereof acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
(d) Notices. Any notice, request or other document required
or permitted to be given or delivered to the holder hereof by the Company shall
be delivered in accordance with the notice provisions of the Agreement.
(e) Limitation of Liability. No provision hereof, in the
absence of affirmative action by Holder to purchase shares of Common Stock, and
no enumeration herein of the rights or privileges of Holder hereof, shall give
rise to any liability of Holder for the purchase price of any Common Stock or as
a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
8
52
(f) Remedies. Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(g) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and shall be enforceable by any
such Holder or holder of Warrant Stock.
(h) Cooperation. The Company shall cooperate with Holder in
supplying such information as may be reasonably necessary for Holder to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Restricted Common Stock.
(i) Indemnification. The Company agrees to indemnify and
hold harmless Holder from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against Holder in any manner relating to or arising out of any failure
by the Company to perform or observe in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Warrant;
provided, however, that the Company will not be liable hereunder to the extent
that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a final non-appealable judgment by a court to have resulted from
Holder's negligence, bad faith or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.
(j) Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Holder.
(k) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
9
53
(l) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: July , 1999
-------
INTEGRATED SURGICAL SYSTEMS, INC.
By:
--------------------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer and President
10
54
NOTICE OF EXERCISE
To: INTEGRATED SURGICAL SYSTEMS, INC.
(1) The undersigned hereby elects to purchase ________ shares of
Common Stock, par value $0.01 per share (the "Common Stock"), of INTEGRATED
SURGICAL SYSTEMS, INC. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
------------------------------
Signature
1
55
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
whose address is
-----------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Dated:
--------------------------
Holder's Signature:
-----------------------------
Holder's Address:
-----------------------------
-----------------------------
Signature Guaranteed:
-------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
2
56
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of the ____ day of July, 1999,
between INTEGRATED SURGICAL SYSTEMS, INC., a corporation incorporated under the
laws of the State of Delaware, and having its principal place of business at
0000 Xxxxxxxx Xxxx Xxxxx, Xxxxx, Xxxxxxxxxx 00000-0000 (the "Company") and the
person signatory hereto (the "Holder").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Holder is purchasing from the Company, pursuant to a
Preferred Stock Purchase Agreement dated the date hereof (the "Purchase
Agreement"), __________ shares of Series E Convertible Preferred Stock, $0.01
par value and a Warrant to purchase ___________ shares of the Company's Common
Stock (terms not defined herein shall have the meanings ascribed to them in the
Purchase Agreement); and
WHEREAS, the Company desires to grant to the Holder the
registration rights set forth herein with respect to the shares of Common Stock
issuable upon conversion of the Series E Convertible Preferred Stock and shares
of Common Stock underlying the Warrant (hereinafter referred to as the "Stock"
or "Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Securities; provided, however, that with
respect to any particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the "1933
Act") and disposed of pursuant thereto, (ii) registration under the 1933 Act is
no longer required for the immediate public distribution of such security
without limitation as to volume as a result of the provisions of Rule 144
promulgated under the 1933 Act, or (iii) it has ceased to be outstanding. The
term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be deemed
to be made in the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Agreement.
Section 2. Restrictions on Transfer. The Holder acknowledges
and understands that prior to the registration of the Securities as provided
herein, the Securities are "restricted securities" as defined in Rule 144
promulgated under the Act. The Holder understands that no disposition or
transfer of the Securities may be made by Holder in the absence of (i) an
opinion of counsel to the Holder that such transfer may be made without
registration under the 1933 Act or (ii) such registration.
With a view to making available to the Holder the
benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Holder to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of
Rule 144; and
57
(b) file with the Commission in a timely manner all
reports and other documents required to be filed by the Company pursuant to
Section 13 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or did file
such reports, it will, upon the request of any Holder, make available other
information as required by, and so long as necessary to permit sales of, its
Registrable Securities pursuant to Rule 144.
Section 3. Registration Rights.
(a) Subject to the last paragraph of Section 3(e)
hereof, the Company agrees that it will prepare and file with the Securities and
Exchange Commission ("Commission"), within 45 days after the date hereof, a
registration statement on Form S-3 (or other appropriate form of registration
statement) under the 1933 Act (the "Registration Statement"), at the sole
expense of the Company (except as provided in Section 3(c) hereof), in respect
of all holders of Registrable Securities, so as to permit a public offering and
resale of the Registrable Securities under the Act.
Subject to the last paragraph of Section 3(e) hereof,
the Company shall use its best efforts to cause the Registration Statement to
become effective, not later than 90 days after the date hereof, or if the
Commission notifies the Company that it will not review the Registration
Statement, not later than ten business days thereafter. The number of shares
designated in the Registration Statement to be registered shall include all the
Warrant Shares and the number of shares of Common Stock which would be issued
assuming a Market Price of $2.00 per share of Common Stock, and shall include
appropriate language regarding reliance upon Rule 416 to the extent permitted by
the Commission. The Company will notify Holder of the effectiveness of the
Registration Statement within one business day of such event.
(b) The Company will maintain the Registration Statement or
post- effective amendment filed under this Section 3 hereof current under the
1933 Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel to the Company, which counsel
shall be reasonably acceptable to the Holder, that all Registrable Securities
may be sold under the provisions of Rule 144 without limitation as to volume,
(iii) all Registrable Securities have been otherwise transferred to Holders who
may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend, or (iv) all Registrable Securities
may be sold without any time, volume or manner limitations pursuant to Rule
144(k) or any similar provision then in effect under the Securities Act in the
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Holder.
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing of
the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Holder shall bear the cost
of underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The Holder
and its counsel shall have a reasonable period, not to exceed three (3) business
days, to review the proposed Registration
2
58
Statement or any amendment thereto, prior to filing with the Commission, and the
Company shall provide each Holder with copies of any comment letters received
from the Commission with respect thereto. The Company shall make reasonably
available for inspection by Holder, any underwriter participating in any
disposition pursuant to the Registration Statement, and any attorney, accountant
or other agent retained by such Holder or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the Company's officers, directors and
employees to supply all information reasonably requested by such Holder or any
such underwriter, attorney, accountant or agent in connection with the
Registration Statement, in each case, as is customary for similar due diligence
examinations; provided, however, that all records, information and documents
that are designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material non-public information shall be kept
confidential by such Holder and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such Holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Holder and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Holder and
other parties. The Company shall qualify any of the securities for sale in such
states as such Holder reasonably designates and shall furnish indemnification in
the manner provided in Section 6 hereof. However, the Company shall not be
required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or the sellers. The Company at its
expense will supply the Holder with copies of the Registration Statement and the
prospectus or offering circular included therein and other related documents in
such quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section
3 to include a Holder's Registrable Securities in any Registration Statement
which is to be filed if, in the opinion of counsel for both the Holder and the
Company (or, should they not agree, in the opinion of another counsel
experienced in securities law matters acceptable to counsel for the Holder and
the Company) the proposed offering or other transfer as to which such
registration is requested is exempt from applicable federal and state securities
laws and would result in all purchasers or transferees obtaining securities
which are not "restricted securities", as defined in Rule 144 under the 1933
Act.
(e) Subject to the last paragraph of this Section
3(e), in the event that (i) the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not filed with the Commission within
45 days after the date hereof, or the Registration Statement is not declared
effective by the Commission not later than 90 days after the date hereof, or if
the Commission notifies the Company that it will not review the Registration
Statement and the Registration Statement is not declared effective not later
than ten (10) business days thereafter, (ii) the Registration Statement is not
maintained as effective by the Company for the period set forth in Section 3(b)
above or (iii) an amendment to the Registration Statement was not filed by the
3
59
Company with the Commission and declared effective by the Commission on a timely
basis to include any additional number of shares of Stock as described in
Section 3(i), if necessary, then the Company will pay Holder (pro rated on a
daily basis), as liquidated damages for such failure and not as a penalty, two
(2%) percent of the purchase price of the then outstanding Registrable
Securities for the first thirty (30) days, and in the event of late filing,
three percent (3%) percent of the purchase price of the Registrable Securities
for every thirty (30) day period thereafter until the Registration Statement has
been filed and in the event of late effectiveness, one percent (1%) of the
purchase price of the Registrable Securities for every thirty (30) day period
thereafter until the Registration Statement has been declared effective. Such
payment of the liquidated damages shall be made to the Holder in cash,
immediately upon demand, provided, however, that the payment of such liquidated
damages shall not relieve the Company from its obligations to register the
Registrable Securities pursuant to this Section.
Notwithstanding the above, but subject to the last
paragraph of this Section 3(e), if the Registration Statement covering the
Additional Registrable Securities (as defined in Section 3(i) hereof) required
to be filed by the Company pursuant to Section 3(i) hereof is not filed with the
Commission within 45 days after the Market Price declines to $2.00 or less for
five consecutive Trading Days, the Company shall be in default of this
Registration Rights Agreement and the liquidated damages provisions of the
foregoing paragraph shall apply.
If the Company does not remit the damages to the
Holder as set forth above, the Company will pay the Holder reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages. The
registration of the Securities pursuant to this provision shall not affect or
limit Holder's other rights or remedies as set forth in this Agreement.
Anything in this Section 3 to the contrary
notwithstanding, the Company will not file a Registration Statement prior to the
date its registration statement for the resale of the shares of Common Stock
issuable upon conversion of its series C and D convertible preferred stock (the
"Series C and D Registration Statement") is declared effective by the Commission
and will not seek acceleration of the effectiveness of the Registration
Statement prior to 45 days after the date the Series C and D Registration
Statement is declared effective by the Commission, and the Company will not be
liable for liquidated damages hereunder for not filing the Registration
Statement or having the Registration Statement declared effective within the
time periods specified herein to the extent attributable to delays in having the
Series C and D Registration Statement declared effective by the Commission.
(f) No provision contained herein shall preclude the
Company from selling securities pursuant to any Registration Statement in which
it is required to include Registrable Securities pursuant to this Section 3.
(g) If at any time or from time to time after the
effective date of the Registration Statement, the Company notifies the Holder in
writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Holder shall not offer or sell any Registrable Securities or
engage in any other transaction involving or relating to Registrable Securities,
from the time of the giving of notice with respect to a Potential Material Event
until such Holder receives
4
60
written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event; provided, however, that the Company may not so suspend the right to such
holders of Securities for more than twenty (20) days in the aggregate during any
twelve month period, during the periods the Registration Statement is required
to be in effect. If a Potential Material Event shall occur prior to the date the
Registration Statement is filed, then the Company's obligation to file the
Registration Statement shall be delayed without penalty for not more than twenty
(20) days. The Company must give Holder notice in writing at least two (2)
business days prior to the first day of the blackout period.
(h) "Potential Material Event" means any of the
following: (a) the possession by the Company of material information not ripe
for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Chief Executive Officer or the Board of
Directors of the Company that disclosure of such information in the Registration
Statement would be detrimental to the business and affairs of the Company; or
(b) any material engagement or activity by the Company which would, in the good
faith determination of the Chief Executive Officer or the Board of Directors of
the Company, be adversely affected by disclosure in a registration statement at
such time, which determination shall be accompanied by a good faith
determination by the Chief Executive Officer or the Board of Directors of the
Company that the Registration Statement would be materially misleading absent
the inclusion of such information.
(i) Subject to the last paragraph of Section 3(e)
hereof, in the event the Market Price declines to $2.00 or less for five
consecutive Trading Days (the "Decline Date"), the Company shall, to the extent
required by the Securities Act (because the additional shares were not covered
by the Registration Statement filed pursuant to Section 3(a)), as reasonably
determined by the Holder, file an additional Registration Statement with the
Commission for such additional number of Registrable Securities as would be
issuable upon conversion of the Preferred Stock (the "Additional Registrable
Securities"), in addition to those previously registered, assuming a Market
Price of $1.00 per share. If the Market Price declines to $1.00 or less for five
consecutive Trading Days and the number of Additional Registrable Securities is
not sufficient to cover conversions of outstanding shares of Series E
Convertible Preferred Stock and exercises of the Warrants, the Company shall
register such additional shares of Common Stock as may necessary to satisfy such
conversions and exercises. Subject to the last paragraph of Section 3(e) hereof,
the Company shall prepare and file with the Commission not later than the 30th
day after the Decline Date, a registration statement relating to the offer and
sale of such Additional Registrable Securities (the "Additional Registration
Statement") and shall use its best efforts to cause the Commission to declare
such Additional Registration Statement effective under the Securities Act as
promptly as practicable but not later than 60 days thereafter. Subject to the
last paragraph of Section 3(e) hereof, if the Additional Registration Statement
is not (i) filed with the Commission by the 30th day after the Decline Date or
(ii) declared effective by the Commission within 90 days after the Decline Date
(either of which, without duplication, an "Additional Registration Date"), then
the Company shall make payments to the Holder as set forth in Section 3(e)
hereof, for late filing or effectiveness, as the case may be, relating to the
Additional Securities.
Section 4. Cooperation with Company. Holder will cooperate
with the Company in all respects in connection with this Agreement, including
timely supplying all information
5
61
reasonably requested by the Company and executing and returning all documents
reasonably requested in connection with the registration and sale of the
Registrable Securities and entering into and performing its obligations under
any underwriting agreement, if the offering is an underwritten offering, in
usual and customary form, with the managing underwriter or underwriters of such
underwritten offering.
Section 5. Registration Procedures. If and whenever the
Company is required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Act, the Company
shall (except as otherwise provided in this Agreement), as expeditiously as
possible:
(a) (i) prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the sale
or other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to sell or otherwise dispose
of the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act) and (ii) take all lawful action
such that each of (A) the Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading and (B) the Prospectus forming part
of the Registration Statement, and any amendment or supplement thereto, does not
at any time during the Registration Period include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) (i) prior to the filing with the Commission of
any Registration Statement (including any amendments thereto) and the
distribution or delivery of any prospectus (including any supplements thereto),
provide draft copies thereof to the Holders and reflect in such documents all
such comments as the Holders (and their counsel) reasonably may propose
respecting the Selling Shareholders and Plan of Distribution sections (or
equivalents) and (ii) furnish to each Holder such numbers of copies of a
prospectus including a preliminary prospectus or any amendment or supplement to
any prospectus, in conformity with the requirements of the Act, and such other
documents, as such Holder may reasonably request in order to facilitate the
public sale or other disposition of the securities owned by such Holder;
(c) register and qualify the securities covered by
the Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holder shall reasonably request (subject to the limitations
set forth in Section 3(d) above), and do any and all other acts and things which
may be necessary or advisable to enable each Holder to consummate the public
sale or other disposition in such jurisdiction of the securities owned by such
Holder, except that the Company shall not for any such purpose be required to
qualify to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified or to file therein any general consent to service of
process;
6
62
(d) list such securities on The Nasdaq SmallCap Market or
other national securities exchange on which any securities of the Company are
then listed, if the listing of such securities is then permitted under the rules
of such exchange or Nasdaq;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering, including, but not limited to, the following:
(i) making such representations and warranties to the
Holder participating in such underwritten offering and to the managers, in form,
substance and scope as are customarily made by the Company to underwriters in
secondary underwritten offerings;
(ii) obtaining opinions of counsel to the Company
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managers) addressed to the underwriters, covering such
matters as are customarily covered in opinions requested in secondary
underwritten offerings (it being agreed that the matters to be covered by such
opinions shall include, without limitation, as of the date of the opinion and as
of the Effective Time of the Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from the
Registration Statement and the Prospectus, including any documents incorporated
by reference therein, of an untrue statement of a material fact or the omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, subject to customary limitations);
(iii) obtaining "cold comfort" letters and updates
thereof from the independent public accountants of the Company (and, if
necessary, from the independent public accountants of any subsidiary of the
Company or of any business acquired by the Company, in each case for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each underwriter participating in such
underwritten offering (if such underwriter has provided such letter,
representations or documentation, if any, required for such cold comfort letter
to be so addressed), in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with secondary
underwritten offerings; and
(iv) delivering such documents and certificates as
may be reasonably required by the managers, if any;
(f) notify each Holder of Registrable Securities covered by
the Registration Statement, at any time when a prospectus relating thereto
covered by the Registration Statement is required to be delivered under the Act,
of the happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and the Company
shall prepare and file a curative amendment under Section 5(a) as quickly as
commercially possible;
7
63
(g) as promptly as practicable after becoming aware of such
event, notify each Holder who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(h) cooperate with the Holders who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts, as the case may be, as the Holders reasonably may
request and registered in such names as the Holder may request; and, within
three business days after a Registration Statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Holders whose Registrable Securities
are included in such Registration Statement) an appropriate instruction and, to
the extent necessary, an opinion of such counsel;
(i) take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Holders of their Registrable
Securities in accordance with the intended methods therefor provided in the
prospectus which are customary under the circumstances;
(j) make generally available to its security holders as soon
as practicable, but in any event not later than 18 months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the commission thereunder
(including, at the option of the Company, Rule 158);
(k) in the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment; and
(l) maintain a transfer agent and registrar for its Common
Stock.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Holder and each person, if any, who controls the Holder within the meaning of
the 1933 Act ("Distributing Holder") against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which the Distributing
Holder may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, or any related
preliminary
8
64
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company by the
Distributing Holder, specifically for use in the preparation thereof. This
Section 6(a) shall not inure to the benefit of any Distributing Holder with
respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send or give (in violation of the 1933 Act or the
rules and regulations promulgated thereunder) a copy of the prospectus contained
in such Registration Statement to such person at or prior to the written
confirmation to such person of the sale of such Registrable Securities, where
the Distributing Holder was obligated to do so under the 1933 Act or the rules
and regulations promulgated thereunder.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) to which the Company or any
such officer, director or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof; arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, or any related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company by such
Distributing Holder, specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
except to the extent of actual prejudice demonstrated by the indemnifying party.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses subsequently
9
65
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is the Distributing Holder, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Holder and the
indemnifying party and the Distributing Holder shall have been advised by such
counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Holder, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 7. Contribution. In order to provide for just and
equitable contribution under the 1933 Act in any case in which (i) the
indemnified party makes a claim for indemnification pursuant to Section 6 hereof
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
Section 6 hereof provide for indemnification in such case, or (ii) contribution
under the 1933 Act may be required on the part of any indemnified party, then
the Company and the applicable Distributing Holder shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the applicable Distributing Holder on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Distributing Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this Section 7. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section 7
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
10
66
Notwithstanding any other provision of this Section 7, in no event shall any (i)
Holder be required to undertake liability to any person under this Section 7 for
any amounts in excess of the dollar amount of the proceeds to be received by
such Holder from the sale of such Holder's Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) pursuant to
any Registration Statement under which such Registrable Securities are to be
registered under the Securities Act and (ii) underwriter be required to
undertake liability to any person hereunder for any amounts in excess of the
aggregate discount, commission or other compensation payable to such underwriter
with respect to the Registrable Securities underwritten by it and distributed
pursuant to the Registration Statement.
Section 8. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Integrated Surgical Systems, Inc.
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Snow Xxxxxx Xxxxxx P.C.
(shall not constitute notice) 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder: As set forth in the signature page
of the Purchase Agreement.
Either party hereto may from time to time change its address
or facsimile number for notices under this Section 8 by giving at least ten (10)
days' prior written notice of such changed
11
67
address or facsimile number to the other party hereto.
Section 9. Assignment. This Agreement is binding upon and
inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. The rights granted the Holder under this
Agreement may be assigned to any purchaser of substantially all of the
Registrable Securities (or the rights thereto) from Holder. In the event of a
transfer of the rights granted under this Agreement, the Holder agrees that the
Company may require that the transferee comply with reasonable conditions as
determined in the discretion of the Company.
Section 10. Additional Covenants of the Company. The Company
agrees that at such time as it meets all the requirements for the use of
Securities Act Registration Statement on Form S-3 it shall file all reports and
information required to be filed by it with the Commission in a timely manner
and take all such other action so as to maintain such eligibility for the use of
such form.
Section 11. Counterparts/Facsimile. This Agreement may be
executed in two or more counterparts, each of which shall be constitute an
original, but all of which, when together shall constitute but one and the same
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other party. In lieu of the
original, a facsimile transmission or copy of the original shall be as effective
and enforceable as the original.
Section 12. Termination of Registration Rights. The rights
granted pursuant to this Agreement shall terminate as to each Holder (and
permitted transferees or assignees ) upon the occurrence of any of the
following:
(a) all Holder's securities subject to this Agreement have
been registered and sold; or
(b) such Holder's securities subject to this Agreement may be
sold without such registration and without limitation as to volume pursuant to
Rule 144(k) promulgated by the SEC pursuant to the Securities Act.
Section 13. Remedies. The remedies provided in this Agreement
are cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
Section 14. Conflicting Agreements. The Company shall not
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement or otherwise conflicts with the provisions hereof. Without
12
68
limiting the generality of the foregoing, without the written consent of the
Holders of a majority in interest of the Registrable Securities, the Company
shall not grant to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted are subject in
all respect to the prior rights of the holders of Registrable Securities set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement. The restrictions on the Company's rights to grant
registration rights under this paragraph shall terminate on the date of the
Registration Statement to be filed pursuant to Section 3(a) is declared
effective by the Commission.
Section 15. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 16. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to the conflicts of law principles of such state. Each party hereto
hereby submits to the exclusive jurisdiction of the United States District Court
for the Southern District of New York and of any New York State Court sitting in
New York City for purposes of all legal proceedings arising out of or relating
to this Agreement. Each party hereto irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court has been brought in
an inconvenient forum. Each party hereto hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to
this Agreement.
Section 17. Amendment and Waivers. This Agreement may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act,
of the holder or holders of the sum of the 85% or more of the shares of (i)
Registrable Securities issued at such time, plus (ii) Registrable Securities
issuable upon exercise or conversion of the Securities then constituting
derivative securities (if such Securities were not fully exercised or converted
in full as of the date such consent is sought). Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any consent
authorized by this Section 17, whether or not such Registrable Securities shall
have been marked to indicate such consent.
Section 18. Severability. If any provision of this Agreement
shall for any reason be held invalid or unenforceable, such invalidity or
unenforceablity shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein. Terms not otherwise defined herein shall be defined in
accordance with the Agreement.
Section 19. Capitalized Terms. All capitalized terms not
otherwise defined herein shall have the meaning assigned to them in the Purchase
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, on the day and year first above written.
INTEGRATED SURGICAL SYSTEMS, INC.
13
69
By:_______________________________________
Xxxxxx X. Xxxxxxx
Chief Executive Officer and President
HOLDER:
________________________________________
By:________________________________________
Authorized Signatory
14
70
EXHIBIT D
July ___, 1999
The Investors that are signatory to the Preferred Stock Purchase Agreement
between the Investors and Integrated Surgical Systems, Inc. dated as of July
____, 1999.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to the Preferred Stock Purchase
Agreement by and between Integrated Surgical Systems, Inc., a Delaware
corporation (the "Company"), and the Investors that are signatories thereto,
dated as of July ____, 1999, (the "Purchase Agreement"), which provides for the
issuance and sale by the Company of (i) 3,000 shares of the Series E Convertible
Preferred Stock of the Company and (ii) warrants to purchase 37,500 shares of
Common Stock of the Company (the "Warrant"). All capitalized terms used but not
defined herein shall have the meanings assigned to them in the Purchase
Agreement.
We have acted as counsel to the Company in connection with the negotiation
of the Purchase Agreement, the Warrant and the Registration Rights Agreement
between the Investors and the Company, dated as of July ____, 1999 (the
"Registration Rights Agreement", and together with the Purchase Agreement, the
"Agreements"). As such counsel, we have made such legal and factual examinations
and inquiries as we have deemed advisable or necessary for the purpose of
rendering this opinion. In addition, we have examined, among other things,
originals or copies of such corporate records of the Company, certificates of
public officials and such other documents and questions of law that we consider
necessary or advisable for the purpose of rendering this opinion. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
copies thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company) where due execution and delivery are a prerequisite to the
effectiveness thereof. As to the matters of fact, we have relied upon
certificates or other written statements of public authorities and certificates
or other written statements of officers and directors of the Company. The
phrases "to our knowledge" or "known to us" when used herein mean that with
respect to the factual matter covered thereby,
71
we have undertaken no independent investigation or verification of such matters,
but have relied solely upon the representations and warranties of the Company
contained in the Agreements and have obtained certificates from the officers and
directors of the Company as to such factual matters, and nothing has come to the
attention of those attorneys in our office who directly participated in this
engagement that (x) would give them actual knowledge or actual notice that such
representation or warranty is not accurate or complete, or (y) any information
set forth in any of the foregoing documents, certificates and information on
which they have relied is not accurate or complete. In addition, we have assumed
that any certificate of a public authority on which we have relied that was
given or dated earlier than the date of this opinion continues to remain
accurate, insofar as relevant to such opinion, from such earlier date through
and including the date of this opinion.
For purposes of this opinion, we have assumed that each Investor has all
requisite power and authority, and has taken any and all necessary corporate
action, to execute and deliver the Agreements, and we are assuming that the
representations and warranties made by the Investors in the Agreements and
pursuant thereto are true and correct.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business and to own, lease and
operate its properties and assets as described in the Company's SEC Documents.
To our knowledge, the Company does not have any subsidiaries and does not own
more than fifty percent (50%) of the outstanding capital stock of or control any
other business entity other than as disclosed in the SEC Documents. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the Company owns or leases property,
other than those in which the failure so to qualify would not have a Material
Adverse Effect.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and the Warrant and to
issue the Preferred Stock, the Conversion Shares, the Warrant and the Warrant
Shares. The execution and delivery of the Agreements by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, except as may be required under the rules of the Nasdaq Stock Market,
Inc., as contemplated the terms of the Preferred Stock (the "Nasdaq
Restriction"). Each of the Agreements has been duly executed and delivered and
the Preferred Stock and the Warrant have each been duly executed, issued and
delivered by the Company and each of the Agreements and the Warrant constitutes
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
-2-
72
3. The execution, delivery and performance of the Agreements by the
Company and the consummation by the Company of the transactions contemplated
thereby, including, without limitation, the issuance of the Preferred Stock, the
Conversion Shares, the Warrant and the Warrant Shares, do not and will not (i)
result in a violation of the Company's Certificate of Incorporation or By-Laws;
(ii) to our knowledge, conflict with, or constitute a material default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company is a party; or (iii) result in a violation of any federal or state law,
rule or regulation applicable to the Company or by which any property or asset
of the Company is bound or affected, except for such violations as would not,
individually or in the aggregate, have a Material Adverse Effect. To our
knowledge, the Company is not in violation of any terms of its Certificate of
Incorporation or Bylaws.
4. The issuance of the Preferred Stock, the Conversion Shares and the
Warrant in accordance with the Purchase Agreement, and the issuance of the
Warrant Shares in accordance with the Warrant, will be exempt from registration
under the Securities Act of 1933, as amended. When so issued, the Preferred
Stock, the Conversion Shares and the Warrant Shares will be duly and validly
issued, fully paid and nonassessable, and free of any liens, encumbrances and
preemptive or similar rights contained in the Company's Certificate of
Incorporation or Bylaws or, to our knowledge, in any agreement to which the
Company is party.
5. To our knowledge, there are no claims, actions, suits, proceedings or
investigations that are pending against the Company or its properties, or
against any officer or director of the Company in his or her capacity as such,
nor has the Company received any written threat of any such claims, actions,
suits, proceedings, or investigations which could reasonably be expected to have
a Material Adverse Effect. To our knowledge, the Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
6. To our knowledge, there are no outstanding options, warrants, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any right to
subscribe for or acquire any shares of Common Stock or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock, except as described in the SEC
Documents or Section 4.3 of the Schedule of Exceptions.
7. Subject to compliance with the Nasdaq Restriction if and when the
same shall apply, the issuance of the Preferred Stock, the Conversion Shares and
the Warrant Shares will not violate the applicable listing agreement between the
Company and any securities exchange or market on which the Company's securities
are listed.
-3-
73
8. The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, $0.01 par value per share, and 1,000,000 shares of
Preferred Stock, $0.01 par value per share, of which 3,520 shares have been
properly designated as Series A Convertible Preferred Stock, 1,000 shares have
been properly designated as Series B Convertible Preferred Stock, 750 shares
have been properly designated as Series C Convertible Preferred Stock, 2,000
shares have been properly designated as Series D Convertible Preferred Stock and
3,000 shares have been properly designated as Series E Convertible Preferred
Stock.
This opinion is limited to the Federal laws of the United States, the laws
of the State of New York and the Delaware General Corporation Law. No opinion is
expressed with respect to the laws, rules or regulations of any other
jurisdiction, whether U.S. or foreign.
This opinion is furnished to the Investors solely for its benefit in
connection with the transactions described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.
Very truly yours,
SNOW XXXXXX XXXXXX P.C.
-4-
74
EXHIBIT E
INSTRUCTIONS TO TRANSFER AGENT
Integrated Surgical Systems, Inc.
July ____, 1999
American Stock Transfer and Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxxx
Dear Sirs:
Reference is made to the Preferred Stock Purchase Agreement and all Exhibits
thereto (the "Agreement") dated as of July ___, 1999, between the Investors
named therein and Integrated Surgical Systems, Inc. (the "Company"). Pursuant to
the Agreement, and subject to the terms and conditions set forth in the
Agreement, the Investors have agreed to purchase from the Company, and the
Company has agreed to sell to the Investors, shares of Series E Convertible
Preferred Stock of the Company, par value $0.01 per share (the "Preferred
Stock"), and the Company has issued to the Investors (i) 3,000 shares of Series
E Convertible Preferred Stock of the Company, par value $0.01 per share, and
(ii) a warrant to purchase 37,500 shares of Common Stock (the "Warrant"). As a
condition to the effectiveness of the Agreement, the Company has agreed to issue
to you, as the transfer agent for the Common Stock (the "Transfer Agent"), these
instructions relating to the Common Stock to be issued to the Investor (or a
permitted assignee) pursuant to the Agreement upon conversion of the Preferred
Stock or upon exercise of the Warrant. All terms used herein and not otherwise
defined shall have the meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and
file with the Commission, and maintain the effectiveness of, a registration
statement or registration statements registering the resale of the Common Stock
to be acquired by the Investor (i) upon exercise of the Warrant and (ii) upon
conversion of the Series E Convertible Preferred Stock. The Company will advise
the Transfer Agent in writing of the effectiveness of any such registration
statement promptly upon its being declared effective. The Transfer Agent shall
be entitled to rely on such advice and shall assume that the effectiveness of
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and shall not be required to
independently confirm the continued effectiveness of such registration
statement. In the circumstances set forth in the following two paragraphs, the
Transfer Agent shall deliver to the Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction or
additional documentation from the Company or its counsel or the Investor or its
counsel or any other party (other than as described in such paragraphs).
(a) In the event the Company files a Form S-3 or Form X-0, X-0 or
SB-2 registration statement and such registration statement is declared
effective by the Securities and Exchange Commission in connection with any such
event, the Investor (or its permitted assignee) shall confirm in writing to the
Transfer Agent that (i) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Common Stock in a bona fide
transaction to a third party that is not an affiliate of the Company; and (ii)
the Investor confirms to the transfer agent that the Investor has complied with
the prospectus delivery requirement.
(b) In the event a registration statement is not filed by the
Company, or for any reason the registration statement which is filed by the
Company is not declared effective by the Securities and Exchange Commission the
Investor, or its permitted assignee, or either of their brokers confirms to the
Transfer Agent that (i) the Investor has beneficially owned the shares of Common
Stock for at least one year, (ii) counting the
75
shares surrendered as being sold upon the date the unlegended Certificates would
be delivered to the Investor (or the Trading Day immediately following if such
date is not a Trading Day), the Investor will not have sold more than the
greater of (a) one percent (1%) of the total number of outstanding shares of
Common Stock or (b) the average weekly trading volume of the Common Stock for
the preceding four weeks during the three months ending upon such delivery date
(or the Trading Day immediately following if such date is not a Trading Day),
and (iii) the Investor has complied with the manner of sale and notice
requirements of Rule 144 under the Securities Act.
Any advice, notice, or instructions to the Transfer Agent required or permitted
to be given hereunder may be transmitted via facsimile to the Transfer Agent's
facsimile number of (000) 000-0000.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any conversion of Preferred Stock or exercise of a Warrant
pursuant to which the Investor acquires Common Stock under the Agreement, the
Transfer Agent shall deliver to the Investor, certificates representing Common
Stock (with or without the Legend, as appropriate) immediately upon request of
the Company, and, if the Transfer Agent is able to deliver such Common Stock to
the Investor's account pursuant to the DWAC system of the Depository Trust
Company, the Transfer Agent shall make delivery pursuant to such system and
provide the Investor with confirmation thereof in lieu of such Common Stock
certificates.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in connection
with these Irrevocable Instructions. The Company agrees to indemnify the
Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investor is an express third party beneficiary of these Irrevocable Instructions
and shall be entitled to rely upon, and enforce, the provisions thereof.
Integrated Surgical Systems, Inc.
By:
--------------------------------
Xxxxxx X. Xxxxxxx,
Chief Executive Officer
and President
AGREED:
AMERICAN STOCK TRANSFER
AND TRUST COMPANY
By:
---------------------
Name:
Title:
2
